In their monthly report, RICS point to 22 per cent of their membership observing a drop-off in landlords advertising rental properties to let in their area, and highlight that reducing numbers of private rental stock is a direct result of taxation changes for buy to let investors, leading to smaller scale landlords exiting the sector.
Meanwhile, tenant demand continues to increase in most of the UK, leading to upwards pressure on rents.
In fact, RICS anticipate that this shortage could create a rise of two per cent on the average rent in the next twelve months, and suggest that average rents in the UK could increase by as much as 15 per cent by 2023, with East Anglia and the South West potentially likely to see the steepest levels of growth.
Simon Rubinsohn, RICS Chief Economist, commented on the findings of today’s report: “The impact of recent and ongoing tax changes is clearly having a material impact on the Buy to Let sector as intended.
“The risk, as we have highlighted previously, is that a reduced pipeline of supply will gradually feed through into higher rents in the absence of either a significant uplift in the Build to Rent programme or government funded social housing. At the present time, there is little evidence that either is likely to make up the shortfall.
“This augers ill for those many households for whom owner occupation is either out of reach financially or just not a suitable tenure.”
Jeremy Leaf, former RICS residential chairman, concurs with the report’s findings and observed: “At the coalface, we are finding that landlords are generally not buying new properties to let out.
“Indeed, some accidental landlords – those who have fallen into the business by default – are not putting their properties on the market, mainly due to recent tax and regulatory changes.
“Those changes are proving counter-productive because the resultant higher rents are making it more difficult for aspiring first-time buyers, even though the playing field is levelling with buy-to-let landlords.”
In terms of residential sales, however, life appears to be a little more stable, with the RICS survey pointing to a solid market in many regions in July, although the level of properties available for sale remain close to historic lows, which is of course a key factor in property values remaining at their current levels.
Whilst the current political turbulence continues, it seems that many buyers and sellers have concluded that life goes on, which has led to the market ticking over at a reasonable level in many areas.
Russell Quirk, the founder of online estate agency Emoov suggested: “There are plenty of positive signs for the UK property market and while the number of sales being agreed has remained fairly flat, things are starting to pick up and this is filtering through to an uplift in price growth.
“While this confidence is more abundant in regions such as the Midlands and Scotland where seller expectation is more aligned with wider market conditions, it’s only a matter of time before this momentum builds across the entirety of the UK.”
Brian Murphy, the Head of Lending for Mortgage Advice Bureau added: “On the residential sales side, today’s RICS report supports other recent House Price Indices in that it suggests the market has broadly remained stable over the last month, although some regions continue to perform above expectations, whilst London and the South East continue to lag.
“Interestingly, East Anglia now seems to have been added to the list of ‘amber warning’ areas where prices, which had previously seen exceptional levels of growth, appear to be softening. However, whether this is a monthly aberration or the start of a longer-term trend isn’t as yet visible.”
Brian continued: “Today’s findings also point to the fact that there is a continuation at the upper end of the market, for example properties of over a million, that vendor ambitions aren’t being met in terms of sold prices, with a notable one in ten properties subject to offers of 10 per cent or more under asking price.
“The mainstream market however, appears to be fairing far better, with asking prices in most cases achieved – subject to regional variances, of course – which yet again supports the lack of properties available and ongoing consumer demand for homes.”
Of course, the conundrum around the rental sector isn’t just a short to medium term issue, but one that could fundamentally impact the housing ecosystem in the UK for decades.
Unless steps are taken soon in order to redress the balance of the reducing number of properties available to let, whilst at the same time ensuring that rents don’t spiral out of the range of affordability for tenants, the current levels of investors divesting their portfolios is likely to increase as further taxation changes come into force next year.
In the meantime, however, for those landlords who are able to restructure their portfolios in a tax efficient manner, the rewards – and continuing profits – are there for the taking.